AGENCIES, Tokyo: Globalisation has its advantages and disadvantages, a fact that has been highlighted extensively in the past few weeks as the COVID-19 pandemic continues to create havoc worldwide forcing industries to grind into a halt.
China, one of the world’s strongest industrial powers before the pandemic broke out was the key link for millions of businesses globally that were dependent for raw materials, finished products and anything virtually in-between.
That dependence on China as the key source is about to change as the impact of coronavirus has given global businesses and governments to rethink its merits.
Japan in a major announcement has said that it willing to fund its companies to shift manufacturing operations out of China. News agency Bloomberg has reported as the disruptions caused to production by the coronavirus pandemic has forced a rethink of supply chains between the major trading partners.
The decision comes as part of its economic stimulus package and the country has earmarked $2.2 billion to help its manufacturers shift production out of China. Of this amount, 220 billion yen ($2 billion)is for companies shifting production back to Japan and 23.5 billion yen for those seeking to move production to other countries.
Market watchers feel that this means there could be opportunities for countries like India which is expecting its GDP to drop attract a lot of foreign direct investment in one shot.
Over the years, China has developed itself as Japan’s biggest trading partner, but imports from China have slumped by almost half in February due to lockdowns to curb the spread of the virus hitting manufacturing and the supply chain. The government’s panel on future investment last month discussed the need for manufacturing of high-value products to be shifted back to Japan.
Shinichi Seki, an economist at the Japan Research Institute, predicted that there would be a shift in the coming days as there already was renewed talk of Japanese firms reducing their reliance on China as a manufacturing base. “Having this in the budget will definitely provide an impetus,” he told Bloomberg.
More than 37 per cent of the 2,600 companies surveyed by Tokyo Shoko Research Ltd. in February had also said they were diversifying procurement to places other than China amid the coronavirus crisis.